A record 3 million U.S. homes will be repossessed by lenders this year as high unemployment and depressed home values leave borrowers unable to make their house payment or sell, according to a RealtyTrac Inc. forecast.

Last year there were 2.82 million foreclosures, the most since RealtyTrac began compiling data in 2005. More than 4.5 million filings are expected this year, including default or auction notices and bank seizures, said Rick Sharga, senior vice president for the seller of default data and forecasts based in Irvine, Calif. There were 3.96 million filings in 2009.

“This will be the peak year, and the main reasons are unemployment and house prices that have stabilized way below mortgage amounts,” Kenneth Rosen, chairman of the University of California’s Fisher Center for Real Estate and Urban Economics in Berkeley, said in an interview.

Government and lender efforts to keep people in their homes are failing to relieve the worst foreclosure crisis since the Great Depression. Unemployment was 10 percent in December, unchanged from the previous month, while the so-called underemployment rate that includes part-time workers and discouraged workers rose to 17.3 percent from 17.2 percent, the Labor Department said Jan. 8.

U.S. lenders permanently modified 31,382 mortgages, or 1 percent, of the 4 million loans targeted under the Obama administration’s foreclosure prevention plan through November, the U.S. Treasury Department said last month. Fewer than half of the 3.2 million homeowners estimated as eligible for mortgage relief by the Treasury actually qualify, according to Herb Allison, assistant secretary for financial stability.

“The government doesn’t have their act together on housing,” Rosen said. “They seem to be pussy-footing around. We need a much more robust effort.”

Obama’s loan-modification program is “destined to fail” because it doesn’t confront the problem of negative equity that is driving foreclosures, Laurie Goodman, senior managing director at Amherst Securities Group LP, told Congress Dec. 8. Homeowners with negative equity, where a property is worth less than the loan, have little incentive to keep paying the mortgage and will “strategically default,” Rosen said.

More than 728,000 borrowers have already received an average $550 reduction in monthly payments, giving them “a second chance to stay in their homes,” she said.

An $8,000 first-time homebuyer tax credit and a $200 billion lifeline to keep mortgage buyers Fannie Mae and Freddie Mac solvent are among the administration’s efforts to date that have supported the housing market, she said.

“Modifications will not be the solution for all homeowners and will not solve the housing crisis alone,” Reilly said.

The number of homeowners with negative equity totaled 10.7 million, or 23 percent, at the end of the third quarter, according to a Nov. 24 report by First American CoreLogic, a Santa Ana, Calif.-based real estate research firm.

Home prices probably fell 13 percent in 2009 to a median of $172,700, following a drop of 9.5 percent the previous year, Walt Molony, a spokesman for the National Association of Realtors, said in an interview. Prices are down 26 percent from the July 2006 peak.

Defaults among prime borrowers are likely to accelerate, adding to a “huge” inventory of properties that banks possess and haven’t yet put on the market, according to Robert Shiller and Karl Case, who created the S&P/Case-Shiller Home Price Index. In September, Goodman estimated that 7 million homes were already in foreclosure or likely to be seized.

The housing market is weighed down by a “a massive supply of delinquent loans” that will end up in foreclosure this year, James Saccacio, RealtyTrac’s chief executive officer, said in a statement Friday.

The end of the government’s tax credit for first-time buyers, scheduled to expire in the spring, and the end of the Federal Reserve’s $1.25 trillion purchase of mortgage bonds, may add to housing woes, Rosen said.

A total of 2,824,674 U.S. properties got at least one foreclosure filing in 2009, a 21 percent jump from the prior year and more than double the number in 2007, RealtyTrac said.

About 2.2 percent of households received a filing last year, according to the company, which sells default data collected from more than 2,200 counties representing 90 percent of the U.S. population.

December filings increased 15 percent from a year earlier to 349,519, the 10th straight month the tally surpassed 300,000. Foreclosures in the fourth quarter jumped 18 percent from the same period in 2008 and fell 7 percent from the third quarter.

Nevada had the highest foreclosure rate for the third straight year in 2009, with more than 10 percent of households receiving at least one filing. December filings fell 22 percent from a year earlier and rose 27 percent from November.

Arizona had the second-highest rate for the year as more than 6 percent of households got a filing. Florida was third at 5.93 percent, followed by California at 4.75 percent and Utah at 2.93 percent, RealtyTrac said.

The other states among the 10 highest rates were Idaho at 2.72 percent, Georgia at 2.68 percent, Michigan at 2.61 percent, Illinois at 2.5 percent and Colorado at 2.37 percent.

source article

A few articles of interest …

From Diana Olick at CNBC: Short Sale ‘Fraud’ Follow. This is a followup to her earlier article: Big Banks Accused of Short Sale FraudThis alleged activity by banks – paying 2nd lien holders without proper disclosure – appears outrageous. Based on Olick’s reporting, this practice appears to be widespread. Kudos to Olick and hopefully the regulators are reading.

From DataQuick: Southland home sales, median price up over last year. As DataQuick notes the median price increase was due to a change in mix – as always I recommend ignoring the median price.

Southern California home sales in December remained above year-ago levels for the 18th consecutive month, bolstered by gains in many mid- to high-end communities. \
…
The December sales tally was the highest for that month since 24,209 homes sold in December 2006, but it was still 11.2 percent below the average for a December – 25,143 sales – over the past 22 years.
…
December’s foreclosure resales remained well below peak levels but were still a large force in the market, edging higher than the prior month for the first time since last February. Foreclosure resales – houses and condos sold in December that had been foreclosed on in the prior 12 months – were 39.6 percent of resales, up from 39.0 percent in November but down from 53.5 percent in December 2008. They hit a high of 56.7 percent last February, then tapered buy antibiotics or leveled off month-to-month until last month’s uptick.
…
Government-insured FHA loans, a popular choice among first-time buyers, accounted for 39.6 percent of all home purchase mortgages in December.

Absentee buyers – mostly investors and some second-home purchasers – bought 19.2 percent of the homes sold in December. Buyers who appeared to have paid all cash – meaning there was no indication that a corresponding purchase loan was recorded – accounted for 24.9 percent of December sales, based on an analysis of public records.

The market is still mostly first time homebuyers and investors.

And the high percentage of FHA buyers is a good lead into the third story …

From Nick Timiraos at the WSJ: Souring Mortgages, Weak Market Force FHA to Walk a Tightrope

Source Article Calculated Risk

Souring FHA-insured mortgages are threatening the agency’s finances. Congress is pressuring [FHA commissioner, Mr. Stevens] to tighten the easy-money standards that once helped people like him, and he is expected to announce revisions as early as this week.

It is important to note that MLS data comes from listings that are represented by brokers who are both members of the MLS system and NAR.  The list also expands to Canada.  But with the massive amount of foreclosures many banks are dealing with bulk buyers directly.  In Southern California last month 20 percent of all buyers went with all cash.  Each MLS is geared to local markets but again many argue that the MLS forces membership into the real estate circles.  To that I would agree.  That is why companies like Zillow had to fight hard to break into this game.  The Department of Justice did break some of this up in 2008 and many online brokerages now have better access to data.  But how can you track something that isn’t reported?

I would argue that during the bubble access to information actually fueled the mania.  For every one article talking about housing being over priced, you had 10 articles telling you how cheap homes were and how home prices never went down.  And for a decade checking your estimated home price would have justified your own belief.  In today’s market there is an underworld of information that isn’t easily accessible.  Part of this is the shadow inventory.  And this is a real issue as banks have admitted to holding homes off the market.  The one argument against this data point is a narrow focus on REO data.  Yet to get to REO (bank owned) you must go through various other steps.  More on that later but let us first look at Southern California as our case study:

Now I want to spend a bit of time on the above chart.  I pulled data from a variety of sources including the MLS, foreclosure records, and Southern California home sales data.  What you’ll notice with the blue line is that MLS inventory for SoCal has fallen from over 160,000 homes to below 60,000.  This you would think would be because of massive amounts of sales.  If you look at home sales it is the case that this has increased but not anywhere close to the bubble heyday where we were seeing 35,000+ homes sold in a month.  The big drop has more to do with sales occurring in the foreclosure market.

This is interesting because I was looking at homes that weren’t listed on the MLS and was dealing with a bank directly only a few months ago.  This is happening many times over.  You can see on the chart above REOs with the green line.  It might look like this number has fallen drastically but this has more to do with programs like HAMP that are already proving to be inefficient.  What these programs do is simply shift housing inventory into the shadows and hope that prices somehow go up in the next few months or year.  Yet that isn’t working out.

Let us run a case study on a new area.  Let us look at home of toxic mortgage superstar Countrywide Financial, Calabasas:

We find that 215 homes are listed in distress.  The MLS has 228 listings and only shows 30 of these.  In other words 185 properties out of a sample size of 413 are hidden to the public.  This is nearly as big as the actual MLS data.  We see this two world scenario occurring in many places.  In some areas it is even worse.  Let us look at Agoura Hills for example.

The MLS has 140 listings and the shadow data is at:

The neighbor of Calabasas and the same trend is spotted.  In this case, the shadow inventory is larger than the MLS data.  In some cities in Southern California the shadow data is enormous and doesn’t resemble anything that is shown on the MLS.  Let us look at Cerritos for example:

Cerritos has 262 homes listed in distress.  The MLS has 70 homes listed.  Last month Cerritos had 23 home sales.  So you either have:

Public perception:  3 months of inventory

Real data:            14 months of inventory (big difference)

It is hard to quantify shadow inventory because many in the industry are too optimistic regarding bailouts.  Unfortunately the industry was so corrupt and polluted for years in the state that Alt-A and option ARM products are going to be trickling out into the market for years.  The only reason we are not seeing defaults hitting the MLS in mass is because of programs like HAMP and suspension of mark to market.  This doesn’t mean there isn’t any problems of course.  It just means that the issues will take longer and be more painful.

This is something we need to wrestle with.  Do we pull the Band-Aid off quickly and deal with it once and for all or do we allow this to become a massive decade long disaster like Japan experienced? It seems like the bankers and real estate industry would rather prolong the misery for as long as possible.  Because what is the worst case scenario?  The market is flooded and homes sell for market prices.  Banks fail as they should.  But instead, banks become zombies and little by little their toxic balance sheet eats away at the productive sector of the economy.  Just look at how well banks are doing:

Some are going to argue that notice of defaults should not be included in the above.  In most normal markets I would agree.  Yet with only 3 to 4 percent of notice of defaults curing this means much of the inventory will reach market.  Could be in six months or as long as 24 months.  But it will hit because home prices are massively underwater and prices haven’t gone up even close to bubble peaks:

And that boost comes at the cost of:

-FHA insured loans requiring only a 3.5% down payment

-Fed buying mortgage backed securities holding rates artificially low

-Moratorium programs like HAMP

-Banks holding inventory off the public view

Yet at a certain point people realize that the MLS is not a reflection of reality.  It is the ideal dream world scenario.  The fact of the matter is each day hundreds of people are unable to make their housing payments.  You don’t need a crystal ball to make that prediction.  You’ll know things are recovering when the shadow data starts thinning out.  Until then don’t believe everything the MLS is telling you.

Source Article Dr. Housing Bubble

A supply of 1.7 million homes headed for sale because of foreclosure or delinquency looms over the nation’s housing market, which could dampen progress toward recovery should the Obama administration fail in its efforts to aid struggling homeowners, researchers said.

A variety of measures to keep discounted bank-owned properties off the market — including moratoriums on foreclosures by major lenders and federal initiatives aimed at keeping people in their homes with mortgage payments they can afford — has helped increase a backlog of so-called shadow inventory 55% in the year ended Sept. 30, according to a report released Thursday by First American CoreLogic, a Santa Ana-based real estate research firm.

Shadow inventory properties are homes that have not been tallied into official inventory numbers tracked by Realtors and other real estate professionals. They include homes taken back by lenders through foreclosures and similar actions, as well as homes whose owners are at least 90 days delinquent on their mortgage payments.

A year earlier, the pending supply of homes not yet up for sale totaled 1.1 million.

A debate has emerged among real estate professionals and economists over how big an effect shadow properties will have on housing prices and sales if lenders unload them onto the market next year.

Some argue that lenders, concerned about potential losses, will moderate the pace of repossessions to avoid depressing the market. Others say efforts by the government won’t be able to keep up with the sheer number of defaults brought on by unemployment and depressed home values.

“One of the key questions is the timing, and a lot of the timing issues are really related to the administration’s HAMP program,” or Home Affordable Modification Program, said Sam Khater, a senior economist for First American. “If many of the loans that are delinquent are able to be successfully modified, and those loans perform, then that should alleviate this issue of the pending supply and shadow inventory.”

Such success is proving elusive. Data released last week by the federal government showed that though the number of temporary mortgage modifications grew, very few had turned into permanent ones. Only 31,382 of the more than 700,000 mortgage modifications under the federal program — less than 5% — had been made permanent by the end of November. Late last month the Obama administration unveiled new measures, including the threat of fines, to push mortgage servicers to improve.

“Our forecast is that [home] prices will drop,” Khater said. “We are basically expecting that the program will continue to proceed as it has in the recent past. There might be a slight improvement, but it is a drop in the bucket relative to the size of the pipeline of default that is coming up.”

In California, home prices and sales have shown steady improvement in part because foreclosure properties have made up a smaller fraction of the housing for sale in recent months. A report released Thursday drugs store by research firm MDA DataQuick showed that the state’s median home price in November was up 1.6% over the prior month, at $261,000. Of the previously owned homes sold statewide last month, 40.6% had been foreclosed on during the last year — the lowest proportion since May 2008, when it was 39.8%, and considerably down from its February peak of 58.8%, DataQuick said.

“One of the big reasons that we have had stability in prices is that there is very little supply these days,” said Gerd-Ulf Krueger, principal economist at HousingEcon.com. “The foreclosure supply really has shrunk, and it will be interesting to see what happens when that comes back on the market sometime next year. . . . It looks like the banks, under the urging of the Obama administration, are going to do the smart thing and mete it out in a more fashionable way, a more careful way.”

First American estimated that the inventory not yet on the market constituted a 3.3-month supply at the end of the third quarter, up from 2.4 months a year earlier. The number of homes for sale was 3.8 million, a 7.8-month supply at the current sales pace, First American said. That’s down from 4.7 million, or a 10.1-month supply, a year earlier.

Stuart Gabriel, director of UCLA’s Ziman Center for Real Estate, laid out a troubling scenario that could play out if shadow properties do hit the market early next year: a contagion effect in which waves of foreclosures beget more, taking down the values of entire neighborhoods. Concern over such an outcome could cause sellers and lenders to act more cautiously, slowing the pace at which they take back troubled properties, he said.

“Some are strategically holding property off the market and are only putting it back on in dribs and drabs,” he said. “They’re playing this interesting game where, on one hand, they need to liquidate these properties, but they can’t create a downward implosion in prices that will come back and bite them even harder.”

Some lenders have declared limited foreclosure moratoriums this year to give troubled borrowers time to catch up on their payments or work out other solutions. Those announcements continued Thursday: Mortgage titans Fannie Mae and Freddie Mac said they would suspend foreclosure evictions from Saturday to Jan. 3, and Citigroup Inc. said it would suspend some foreclosures and evictions from today to Jan. 17.

And some experts aren’t worried about the possibility of a foreclosure wave next year.

John Husing, an economist who studies the Inland Empire, recently wrote a report arguing that home prices in that hard-hit area had bottomed at the end of the second quarter and were likely to keep recovering because homes had reached record levels of affordability.

At the end of the second quarter, for instance, 73% of all families in San Bernardino County and 68% in Riverside County could afford the cheaper 50% of homes in their counties, Husing wrote, citing data from the California Assn. of Realtors. In 2005, 19% in San Bernardino County and 14% in Riverside County could afford to buy such homes.

“It’s not the supply side of the market that we should be focusing on anymore,” Husing said. “Demand has taken off because affordability, at least in the inland region, is at record levels.”

A week ago, he and a couple of buddies bought a two-unit apartment building for nearly a million dollars. They had only a little cash to bring to the table but, with the federal government insuring the transaction, a large down payment was not necessary.

“It was kind of crazy we could get this big a loan,” said Mr. Rowland, 27. “If a government official came out here, I would slap him a high-five.”

In its efforts to prop up a shattered housing market, the government is greatly extending its traditional support of real estate, including guaranteeing the mortgages of middle-class and even upper-class buyers against default.

In 2007, the government did not insure a single mortgage in this city, one of the most expensive in the country. Buyers here, as well as in Manhattan, Santa Monica and every other wealthy area, were presumed to be able to handle the steep prices and correspondingly hefty down payments on their own.

Now the government is guaranteeing an average of six mortgages a week here. Real estate agents say the insurance is such a good deal that there will soon be many more.

Policy changes like the shift in insurance, while often introduced on a temporary basis, are becoming so popular that they could prove difficult to undo. With government finances already under great strain, the policy expansions are creating new risks for American taxpayers.

The Internal Revenue Service is giving tax rebates to first-time buyers, and soon to move-up buyers, in a program beset by accusations of fraud. And the government agency that issues mortgage insurance, the Federal Housing Administration, is underwriting loans at quadruple the rate of three years ago even as its reserves to cover defaults are dwindling. On Thursday, the Mortgage Bankers Association said more than one in six F.H.A. borrowers was behind on payments.

F.H.A. insurance was created for minority and low-income families on line pharmacies who could not come up with the traditional down payment of 20 percent required by private lenders. Buyers receive loans from government-approved lenders and are required to document their income and assets. They must pay a substantial insurance premium of 1.75 percent of the loan. But in return, their down payment can be as low as 3.5 percent.

For decades, most F.H.A. loans were in low-cost states like Texas and Michigan. Under the agency’s loan limits, houses along the coasts were usually too expensive to qualify. In 2007, fewer than 4,400 F.H.A. loans were made in California, according to the research firm MDA DataQuick, and none were in San Francisco.

The Economic Stimulus Act of 2008 helped change that by temporarily doubling the maximum loan the F.H.A. insured, to $729,750. A two-unit property like the one bought by Mr. Rowland and his friends can be insured for up to $934,200.

“F.H.A. financing was a lost language in San Francisco, the real estate equivalent of Aramaic,” said Michael Ackerman, the agent who represented Mr. Rowland and his friends. “Once the limits were raised, smart buyers started calling.”

The F.H.A. has insured more than 107,000 loans so far this year in the state, according to DataQuick, about 270 of them in San Francisco.

Condominium buildings approved for F.H.A. financing — a relative handful — trumpet the news on their Web sites. The Soma Grand, a new 246-unit building downtown where one-bedrooms cost in excess of $500,000, received F.H.A. certification early in the summer. A half-dozen buyers since then used F.H.A. insurance.

At Guarantee Mortgage Corporation, which has 150 mortgage brokers in the Bay Area, Seattle and Portland, Ore., F.H.A. loans have grown to about 15 percent of its business, from less than 3 percent a few years ago.

“It sure has helped us put a lot of deals together,” said Guarantee’s chief sales officer, Bob Siefert. He predicts that a quarter of Guarantee’s deals will soon be guaranteed by the F.H.A.

Some F.H.A. borrowers here say they have the cash for a full down payment but would rather invest it in the stock market or use it for remodeling. Others, like Mr. Rowland and his friends, simply do not have the money required by private lenders — which would have been nearly $200,000, in their case.

We were resigned to waiting another year,” said a second partner, Michael Bedar, 31. “Then we read about the F.H.A. I had never heard of it before, and couldn’t quite believe it. But it was the answer to our problems.” They put down about $33,000, split among the three of them.

While the F.H.A. is certainly strengthening the high-end market in the Bay Area by prompting more sales, there are growing concerns that it might become a destabilizing force.

Kenneth Donohue, inspector general for the Department of Housing and Urban Development, the parent agency of the F.H.A., said the higher loan limits were increasing the potential risk to the F.H.A. Last week, the agency said its cash reserves had fallen below their Congressionally mandated minimum because of the large volume of foreclosures.

“If one of these higher-limit loans fail, that’s equivalent to two or three cheaper loans,” Mr. Donohue said. “You have to ask yourself, was the F.H.A. ever intended to address these markets?”

He sees another risk: larger loans will be a greater draw for those who want to commit fraud. That would exacerbate a problem already besetting the agency.

Even some San Francisco agents who are doing F.H.A. deals worry about the long-term consequences. Real estate commissions are 6 percent. If the value of a property were to hold steady, a seller who put down the F.H.A. minimum would suffer a loss after fees. And while the Bay Area has traditionally been an excellent investment, the last few years have proved a big exception.

“Is this going to be the next wave of the housing downturn?” asked Eileen Bermingham, an agent with Pacific Union. “With such a minimal down payment, how do we make sure people don’t get in over their heads?”

The F.H.A. commissioner, David H. Stevens, said recently that its loans were relatively safe because the buyer was required to live in the property. They “are for shelter. They aren’t speculative-type investments,” Mr. Stevens said.

But the idea of a house as an investment dies hard. Mr. Bedar, Mr. Rowland and the third partner in their property, Jordan Kurland, are all in the technology field, but their dreams of wealth do not feature stock options.

“We’re banking on real estate,” said Mr. Kurland, 24. “Everyone expects prices to keep going up.”

Mr. Kurland and Mr. Bedar, who are employed full time, are the buyers of record. Mr. Rowland, a freelancer, will have his interests protected by a legal agreement.

Their building, for which they paid $963,000, is on a quiet street in the up-and-coming Hayes Valley neighborhood, close to fashionable restaurants they have already been trying out. The friends plan to live in the bottom unit and rent out the top. Thanks to rock-bottom interest rates, none of them will pay much more than a thousand dollars a month. “Everyone should have the chance to do this,” Mr. Kurland said.

Everyone may get a chance.

A few weeks ago, Congress extended the higher lending limits for another year. Representative Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, said in an interview that he planned to introduce legislation next year raising the maximum F.H.A. loan by $100,000, to $839,750.

His bill would make the new limits permanent.

If you thought home prices were bottoming out, you may be wrong. They’re expected to head a lot lower.

Home values are predicted to drop in 342 out of 381 markets during the next year, according to a new forecast of real estate prices.

Overall, the national median home price is predicted to drop 11.3% by June 30, 2010, according to Fiserv, a financial information and analysis firm. For the following year, the firm anticipates some stabilization with prices rising 3.6%.

In the past, Fiserv anticipated the rapid decline in home-sale prices over the past few years — though it underestimated the scope.

Mark Zandi, chief economist with Moody’s Economy.com, agreed with Fiserv’s current assessments. “I think more price declines are coming because the foreclosure crisis is not over,” he said.

In fact, those areas with high concentrations of foreclosure sales will experience the steepest drops, according to Fiserv. Miami, for example, is expected to be the biggest loser. Prices are forecast to plunge 29.9% by next June — after having already fallen a whopping 48% during the past three years.

If Fiserv’s forecast holds, Miami real median home price will tumble to $142,000 by June 2011.

In Orlando, Fla., the second-worst performing market, Fiserv anticipates a 27% price collapse by June 2010, followed by a less severe drop the following year. In Hanford, Calif., prices are estimated to drop 26.9% and continue falling 9.5% in 2011; in Naples, Fla., they’re expected to fall 26.8% and then flatten out.

Other notable losers include Las Vegas, where prices have already fallen 54.6% and are expected to lose another 23.9% by June 2010. In Phoenix values have already collapsed by 54% and could fall another 23.4%. In both cities, Fiserv anticipates the losses to continue into 2011, but they will be less than 5%.

Prices had stabilized

The latest forecast is at odds with the past few months of the S&P/Case-Shiller Home Price index. That report has given hope that most housing markets may have already stabilized because the composite index of 20 cities rose in May, June and July. Nationally, it found that home prices have gained 3.6%.

Brad Hunter, chief economist for Metrostudy, which provides housing market information to the industry, however, expects a change in fortunes, however.

“I’m afraid Case-Shiller may be just a temporary reprieve,” he said.

He pointed out that the tax credit for first-time home buyers helped support prices during the three months of Case-Shiller gains. By the end of November, the credit will have been used by 1.8 million homebuyers, at least 355,000 of whom would not have bought a house without the tax break, according to estimates by the National Association of Realtors. But the market assistance ends when the credit expires on Dec. 1.

Hunter also sees a new wave of foreclosure problems coming from higher priced loans and prime mortgages. He expects a high failure rate for option ARM loans that were issued to prime customers so they could buy homes in bubble markets, such as order prescription drugs without a prescription California and Florida. In those areas, prices for even modest homes had skyrocketed.

Winners

A handful of metro areas will buck the trend, according to Fiserv. Six markets will remain flat, and 33 will actually post gains. The biggest winner will be the Kennewick, Wash., metro area, where home prices have ramped up 8.9% over the past three years and are expected to increase another 3.4% by June 2010.

Fairbanks, Alaska, prices are anticipated to rise 2.5%, while Anchorage will climb 2.1%. Elmira, N.Y., prices may inch up 1.8%.

The nation’s biggest metro area, New York City, will underperform the nation as a whole over the next two years, according to Fiserv. Prices, which have already fallen 21.7% to a median of $375,000, are expected to fall 17.4% by June 2011.

Home values in the nation’s second largest city, Los Angeles, have fallen 43.3% since June 2006 to a median of $313,000. They are expected to dive another 20.2% over by June 2010, and then start to climb in 2011. Chicago prices, which have fallen 25.2% to $227,000, will drop only 4.1% over the next 12 months and then starting to climb.

The Detroit metro area now has the dubious distinction of having the lowest home prices in the country. Prices have dropped 51.7% to a median of $50,000. They’re expected to fall another 9.1% and then stabilize.

New Legislation Signed

This information is for California tenants only. Governor Schwarzenegger signed two pieces (yes, two!) pieces of legislation benefiting California tenants. The first, SB 290 (sponsored by Mark Leno) makes the 60-days’ notice requirement for tenant evictions permanent. This means that any tenant in the state who has lived in her rental for one year or more cannot be evicted with less than 60-days’ get prescription drugs without prescription notice in “no cause” evictions. And it means that tenant groups don’t have to mobilize every couple of years to renew the legislation. However, this does not affect tenants protected by local “just cause” ordinances; those tenants cannot be evicted without cause.

This is excellent information.  The number of closed escrows fell in the last data order prescription drugs online report but not by much.  The big trend is with REO and Short Sale information.  Short sales in more mid to upper tier markets in California have been largely absent.  But in this data set they make up a good portion of sales.  However, the big market mover is the REO subset making up nearly 45 percent of sales.  Months of inventory is low at 3.2 months and the median price of sales is $183,000.  Last year at this point when prices were already depressed the median price was $194,950.

The mean is at $207,199 so the bulk of home sales are falling within this range and if we look at the mode, this is confirmed with the $200k to $249k range.  So what is happening is we have a market that does have brisk sales but only because of lower prices and a glut of REO inventory.  If we look at the overall sales count for the year, sales have increased:

Now compare this to last year:

It is a simple equation.  Home sales have jumped up 12.2 percent while the median price has fallen 22.2 percent.  Cheaper homes move inventory.  If we dig into the financing data what we find is indicative of many distressed California markets:

The majority of sales are FHA insured loans and cash buyers.  That is, we have a large number of first time home buyers most likely lured by the $8,000 tax credit and many cash investors probably looking to buy cash flow properties.

It is great to have information like this because it really tells us a lot about a housing market.  It is unfortunate we don’t have data like this for the state of California.

Source Article.

SACRAMENTO – County assessors are increasingly worried that the historic drop in property values in the Inland area and around the state will turn out to be more than just a temporary blow to government coffers.

Millions of properties statewide have been temporarily reassessed to reflect their lower market value. Under state law, property owners will pay reduced taxes until the market recovers and the property returns to its base value.

But assessors and other tax officials say there are signs that some property owners are going a step further: using back-and-forth ownership transfers to trigger a property reassessment and lock in a much lower level of property taxes.

Court rulings give assessors the power to ignore such transfers. But identifying them is not easy, they say. They worry that large numbers of changes could cost governments significant amounts of future property-tax revenue, a major part of government budgets.

“It’s a little scary, actually,” said Larry Ward, the assessor in Riverside County, where the assessed value is down $16.2 billion for 2009-10. “Theoretically, somebody changing ownership could mean a lot of difference in tax value.”

There are no estimates on how many properties have been permanently reassessed to lower values after change-of-ownership transfers.

Assessors, though, have started reviewing their records and recently asked state tax authorities to weigh in.

Three weeks ago, the state Board of Equalization issued an advice letter telling assessors they could decline to reassess a property if they conclude it was little more than a paper shuffle meant to trigger a reassessment.

But officials said detecting such transfers would take hundreds of staff hours.

“It’s kind of a loophole in the law,” said Dennis Draeger, the assessor of San Bernardino County, which also has seen large drops in assessed value. “We’ve got our eyes open but some of them may order prescription drugs never be discovered.”

property taxes

Under Prop. 13, the landmark 1978 ballot measure, properties are reassessed when they change ownership. That typically happens when a property is sold.

Assessors’ concern stems from a twist on the process. According to the Board of Equalization, the actions involve a property owner transferring property to someone else through a deed, and then that person transferring the property back to the original owner with another deed, sometimes on the same day, with no one moving in or out.

Some property-rights activists take issue with tax officials’ concern about change-of-ownership transactions that don’t involve moving trucks.

In particular, skeptics contend that assessors are reversing the stance they took during the real-estate surge of the late 1990s and earlier this decade.

According to the California Taxpayers Association, the goal of assessors then was to detect as many change-of-ownership transactions as possible — not to prevent them, but to make sure they triggered reassessments and locked in the higher market values then common, which meant more tax revenue.

“The law says change of ownership triggers a reassessment. If you can trigger a reassessment in high market, why can’t you trigger it in a low market?” asked Valerie Faltas, who advises property owners how to lower their property tax bills.

Faltas runs one of several Web sites that advertise services to reduce property tax bills. She said she thinks the actions she recommends are legal and dismisses as scare tactics tax officials’ warnings of nose-diving revenue.

The state law that temporarily reduces some properties’ assessed values during down markets, known as Prop. 8, is complicated and unfair and still leaves people owing high tax bills after the market recovers.

“I don’t think people should be penalized just because they bought in a high market,” said Faltas, who said she used to work for the Los Angeles County Assessors Office.

STATEWIDE DROP

The state’s housing market was roaring in the late 1990s and throughout much of this decade.

California’s assessed value grew from $2.57 trillion in 2001-02 to $4.56 trillion in 2008-09, thanks to a construction surge and fast-rising home prices.

In Riverside County, the assessed value grew from $98.8 billion to $243 billion during that time. San Bernardino County’s assessed value grew from $85.3 billion to $181.8 billion.

But for 2009-10, the statewide assessed value is $4.4 trillion, a 2.4 percent decline. It was the first year-to-year drop since records started being kept in 1933.

The hit in the Inland area was much greater — Riverside County had a 10.5 percent drop and San Bernardino County had a 6 percent decline.

The drop in property tax revenue has been a big part of local government budget woes.

California’s treasury relies much less on property tax revenue, but the state has to make up some of what schools lose in local property tax money.

In past real estate downturns, such as in the early 1990s, tax officials were confident that assessed values would recover. But they said there was no fear then of large numbers of change-of-ownership transactions permanently reducing the tax base.

RIGHT OF REFUSAL

State officials said a 1991 court decision gives county assessors the ability to refuse to reassess the property in such cases. But finding them amid hundreds of thousands of properties — Riverside and San Bernardino counties together have about 1.6 million parcels — is another matter.

“Quite frankly, they don’t know. They don’t analyze each property,” Faltas said.

Dan Goodwin, Ventura County’s assessor and the head of the statewide assessors association, said he thinks such transactions are happening on a small scale so far.

“But I can’t afford to have 10,000 or 20,000 people doing this,” Goodwin said. “This is a small window of opportunity. And it’s going to close when property values rebound. And they always rebound.”

Source Article